Performance Bonds, Bankers’ Guarantees, and the Mareva Injunction

O'Driscoll, Peter S. | January 1, 1985

Performance bonds and bankers’ guarantees are common features of international sales and construction contracts. They figure prominently in contracts with buyers and employers in the Middle East. In recent years, the amounts represented by these instruments have grown so large that banks have begun to syndicate them in order to limit the exposure of any one bank. With so much at stake, it is imperative that traders, bankers, and lawyers understand the legal implications of performance bonds and bankers’ guarantee agreements and the treatment of such agreements by the courts. This Comment will address some of the problems associated with performance bonds and bankers’ guarantees in international trade and the response of the English courts to these problems. In particular, it will discuss the means by which payment of a performance bond may be stopped or impeded under English law, focusing especially on the use of the Marevainjunction in the context of an alleged fraudulent demand on the bond or guarantee.